The Market Enters Uncharted Territory

The story of the market this week was its ability to shrug off bad news. A hot consumer price index report was ignored, but job layoffs by Apple (AAPL) caused a dip on Tuesday. That was reversed after Netflix (NFLX) earnings were not as bad as feared.

The main thing that drove the market this week was the hope that a slowing economy has already been greatly discounted. There is some belief that we have seen peak inflation, and that has been reinforced by a steady decline in gasoline prices and some other commodities. But the fear has been that high rates would cause a recession and the market seemed to set that worry aside for now.

The recession fears did return on Friday as bonds flew higher and interest rates declined to the lowest levels since May in some maturities. A poor report from Snap (SNAP) and a couple of other companies on Thursday night stirred up some worries about expectations for the big reports that are coming up next week.

Next week will be very eventful with earnings reports from some of the most important stocks in the market as well as the Fed interest rate decision. Stocks have been running up very strongly all week into that news, and some folks decided on Friday that it may be a good move to cut back rather than risk being caught in a “sell the news” response.

The bounce this week was strong enough to create a crowd of folks who are ready to embrace the idea that the worst is over. It also produced some “fear of missing out” and gave the action a euphoric feeling for a couple of days. While it is possible that it isn’t just a bear market bounce, there is no way to know at this point. We will have more clues next week when we see how the market handles earnings and the Fed.

We have a combination of macroeconomic and market conditions that are unlike anything we have seen before. There are no historical precedents or a playbook for what is happening. We just have to navigate the action as it unfolds.

Have a great weekend. I’ll see you on Monday.